April 19, 2018 by Andrew Minalto - 37 Comments

VAT for Amazon Sellers – The TRUTH No One Wants to HEAR!

Welcome back!

Let’s talk about Value Added Tax (VAT) as it relates to selling on Amazon.

Recently, there has been a storm forming around this subject, especially after the infamous Amazon invalid VAT number email that I covered in last week’s post. I have received tons of emails from my blog readers asking one simple question: DO I HAVE TO REGISTER FOR VAT?

Since I am often responding to each individual with the same answers and information over and over again, I’ve decided to create a blog post that answers this question in as much detail as possible. I will cover as many scenarios as I can think of, so that after reading this post, it is 100% clear whether you, in your specific case, have to register for VAT to sell on Amazon or not. With that, let’s get started!

The Basics of VAT

VAT is something we all hear about and experience on a daily basis, whether it’s through business transactions, Amazon forums, retail shops, or invoices and receipts. VAT (Value Added Tax), as the name suggests, is a consumption tax based on the value of goods and services. This tax is used in all European Union countries, as well as many other countries. In Canada, for example, it is called GST (Goods and Services Tax), but the principle remains the same.

The VAT rate varies from country to country, but in Europe, it is usually around 20%. Here are a few examples of current EU VAT rates for 2018:

  • Belgium – 21%
  • Austria – 20%
  • Denmark – 25%
  • France – 20%
  • Germany – 19%
  • Ireland – 23%
  • Italy – 22%
  • Poland – 23%
  • Sweden – 25%

In the UK, the rate is set at 20%, which actually puts us amongst the countries with lowest VAT rate. In the past, it has been even lower; prior to 4th of January of 2011, the VAT rate in the UK was just 17.5%, and there was once a temporary period where VAT was only 15%.

The VAT rate we are talking about here is the STANDARD VAT rate, which is the rate used on most everyday goods like:

  • Home products
  • Garden products
  • DIY & tools
  • Clothing & shoes
  • Etc.

Basically, most everyday products that you see on Amazon or in your local Tesco will have the standard VAT rate of 20% applied to them. It is the rate you are most likely to encounter on a daily basis.

However, there are some goods categories that have a special, lower VAT rate of just 5%, these include:

  • Children’s car seats
  • Radiators
  • Gas/Oil fired boilers
  • Solar panels
  • Water and wind turbines
  • Etc.

And there are some goods and services categories that are 0% VAT rated, like:

  • Charity shops, selling donated goods
  • Equipment for disabled people
  • Low-vision aids
  • Printed books
  • Children’s clothing and footwear
  • Motorcycle and bicycle helmets
  • And others!

Lastly, there are goods and (usually) services that are completely VAT exempt, like:

  • Admission charges by charities
  • Lottery tickets
  • Betting and gaming
  • Bingo
  • And others!

You can get a more detailed overview of goods and services and their various VAT rates on this page.

In each country, these categories of VAT rates for goods and services will vary. The information presented here only applies to the United Kingdom, so if you’re residing in another EU country, you will need to check your local information on this.

VAT is charged at the moment of a sale/transaction, and the business or person who is VAT registered is responsible for filling out regular VAT returns (usually quarterly) to forward the VAT amount they have collected from customers to the HMRC.

When you are VAT registered, you can claim back the VAT that you pay on your business expenses. So, in that VAT return, you will also provide details of all the VAT paid on business expenses—for example, VAT paid on goods purchases, online selling fees, and other business-related expenses—and DEDUCT that amount from the payable VAT.

Let’s do a quick example to really make this crystal clear. Let’s say that, in a three-month period, you have sold goods worth £10k (incl. VAT). The amount of VAT you charged was £1.67k (20%), but you also paid £1k in VAT in that period through your normal business expenses. In that case, you would only send £0.67k to the HMRC, which is the difference between what you have charged and spent in VAT.

This is obviously a simplified explanation. The VAT law and rules, especially in relation to international trade, are very complex. However, this is just to give you a basic understanding of how it fundamentally works for an average seller.

The most important thing to remember is: You do not want to register for VAT when you’re just starting out IF you’re not obligated to register for it. We’ll cover how to know if you’re obligated to register for VAT later in this post. Just know that it does not make financial sense or benefit you to voluntarily register for VAT because you will always end up paying more in tax than a seller who is not VAT registered, if you sell the same item at the same price.

As always, there are some rare exceptions to this.

It could be financially beneficial to register for VAT from ONE one IF:

  • The majority of your sales will be B2B transactions. If you are selling the product to other VAT-registered businesses, then it might benefit you to register. Businesses don’t care about paying VAT because they know that they will deduct it from the payable amount anyway. Plus, businesses like to get a proper VAT invoice for their purchases. On Amazon, this is now very easy to do with the Amazon Business Services, which includes automated VAT invoicing solutions. More on this another time.
  • You sell zero-rated or 5% VAT rated goods. It’s pretty simple; you will charge a small % of VAT on your end sales but will be able to claim back the full VAT paid on your business expenses. I would still recommend that you do the math to figure out exactly how beneficial it is in your particular situation, but if you sell 0% VAT rated goods, you definitely want to be VAT registered from day one, so you can claim back VAT on business expenses. As you won’t be charging your customers any VAT, the HMRC will actually be sending you payments for the VAT you have spent on business expenses. It’s basically free money.
  • You plan on investing aggressive amounts of money into inventory, equipment, or plan to work with huge losses in the first year or two of trading. In this situation, you would be spending MORE in VAT than you earn, which creates the negative VAT balance. So again, the HMRC will pay you back the difference you have spent in VAT to what you have taken in sales. This situation will be very rare, though, and will be more applicable to bigger companies who usually come into the market very aggressively with offices, manufacturing plants, huge advertising budgets, etc.

I won’t go into detail on each of these three scenarios as they are the exceptions and not the rule. That said, if you do fall under any of these three categories, I would recommend you consult an accountant who can assess your situation and do the correct calculations for you to help you decide whether it is worth registering for VAT from day one or not.

There is also a FLAT VAT rate scheme available in the UK, which allows small businesses to pay a fixed amount of VAT to the HMRC to keep their accounting as simple as possible. For the sake of time and relevance, I won’t get into it in this post. We’re just going to cover the VAT information that will apply to the vast majority of sellers here. Just know that this scheme exists and might be worth looking into further if you’re UK-based.

For Amazon sellers, I do not specifically recommend this flat VAT rate scheme because some of the Amazon VAT services may not be available to you if you are using this option. But again, please consult a qualified accountant on this topic.

Ok, this is as far as I want to go into VAT basics. The topic is obviously huge, so if you want to dive deeper, you can find tons of reading material on the HMRC website or simply book a consultation with an accountant who can provide you with qualified advice. Please remember that I am not an accountant, so please do not ask me specific VAT/accounting questions as I can’t provide you with qualified information.

Now, let’s take a closer look at how exactly VAT relates to Amazon sellers, and, most importantly, how you can figure out whether you need to register for VAT or not!

VAT Registration Thresholds

I have already touched on this subject, but it bears repeating. When you’re just starting out and registering a Ltd. company or have Sole Trader status, you won’t be VAT registered by default. You can voluntarily register for VAT from day one IF you want, but most typically won’t and will only register for VAT when they reach a certain threshold of sales.

This threshold will be different in each country, and it often changes from year to year.

Right now, in the United Kingdom, for the year 2018, the threshold stands at £85,000 per last 12 months of trading.

So, you have to make at least £85k in SALES over the last 12-month period before you’re obligated by law to register for VAT in the UK.

Often people ask: what does this number include? Do I have to take off my Amazon fees or FBA fees?

No, you don’t have to take anything off this number. This is purely your sales/turnover—the amount of money you’ve taken in for the last 12 months of trading. Keep in mind that this is NOT based on a calendar year! It is based on the last 12 months of sales on a rolling basis.

So, if you think that you have come close to the threshold, you will want to check your last 12-month sales report in your Amazon account to see if you have reached the £85k threshold or not:

It is advisable to register for VAT in advance, e.g., when you see that you will go over the threshold in the next month, that’s when you should register. Otherwise, you’re just making more accounting work for yourself later on because you’ll have to calculate VAT on sales that happened prior your registration date. My advice is to just keep it simple and register at least a few weeks ahead of time.

Sometimes you will find that you balance right on the edge of the threshold. As we know by now, not being VAT registered is more beneficial, so you may want to lower your marketing activities at such a time to artificially lower your sales and stay below the threshold. That is only recommended if you know for sure that your sales won’t improve that much over time and won’t go over £100k or more in near future.

If you discover that you have gone slightly over the VAT threshold in one month but know for sure that you will go back under the next month, you can ask for a temporary exemption from the VAT registering process. You can find more details on this on the HMRC website.

And just like you have registered for VAT, you can also DEREGISTER from VAT if your sales fall below the threshold in the future. So, say you start selling a very hot product on Amazon and your sales go over the £85k threshold, but then, after two years, demand for the product drops and your sales are down to £60k per year. Then you can deregister from VAT and continue selling on Amazon as a non-VAT registered seller.

Ok, so far, so good! Keep in mind that everything I have covered so far in this post can also be applied to any offline business too since the VAT basics are same for offline and online businesses. However, there are a few slight differences that online sellers, including Amazon sellers, need to face—so let’s get into it!

Distance Selling VAT Thresholds

Yes, there’s another VAT registration threshold, and it’s called the “Distance Selling EU VAT Threshold”. This particular threshold was introduced just a few years ago to help fight VAT evaders in the EU and basically put the appropriate VAT money in the pockets of the country that the item is sent to. So, for example, if you sell something to a person in Germany, the German VAT rate is applied to the sale and Germany receives that VAT payment from you.

These VAT thresholds apply to any business selling to an EU country! It doesn’t matter where you’re located in the World—be it the UK, the US, China or Brazil—if and when you reach the specified threshold of each country, you must register for VAT in that country, start charging local VAT on sales to that country, do VAT returns, and pay the appropriate VAT to that country.

Sound complicated?

It is.

Registering for VAT in a different country, usually in a different language, and completing VAT returns can be a very complex and time-consuming task. It’s not usually something you can do easily on your own.

Luckily for us, these distance selling EU VAT thresholds are pretty high. Here are few examples:

  • Austria – 35k EUR
  • Germany – 100k EUR
  • Ireland – 35k EUR
  • Spain – 35k EUR
  • France – 35k EUR
  • United Kingdom – 70k GBP

Yes, the UK distance-selling limit stands at £70k, and this will be applicable to sellers living outside the UK but who are targeting the UK marketplace and, specifically, Amazon.co.uk. Once your sales reach £70k in a calendar year in the UK, you are obligated by law to register for VAT in the UK.

This is an important distinction. Unlike the normal VAT registration rules that we have already covered, these distance-selling thresholds are calculated per CALENDAR YEAR—not the last 12 months of trading. This makes the process much easier for you as you can do the calculations based on the current year instead of the last 12-month period.

Now, this VAT registration threshold kicks in when your sales to a specific country reach the limit set by that country, but when goods are NOT stored in that country. So, this applies when you store goods in your home country and send orders out internationally from your base location via regular post and courier services.

It is very important to understand this caveat, as there is one other factor that can kick in and require IMMEDIATE VAT registration in a foreign country:

Goods location

Yes, goods location.

This is one of the biggest misunderstandings when it comes to VAT and selling on Amazon. Goods location can and will trigger a legal VAT registration requirement. Many people are not aware of this because this EU law is just a few years old, but it doesn’t change the fact that it is currently effective and being enforced. Even Amazon has taken action to bring sellers in line with this legal requirement by asking for VAT numbers based on this factor alone.

So how does this work?

This time, the rules are very simple:

You must register for VAT in each country where your goods are stored, except your local/home country!

And there are no thresholds! It starts from day one, so even if you send just 10 items to another country and sell them from there, you need to register for VAT in that country. Even more, you don’t even have to sell to that specific country! The location of the goods alone triggers this VAT registration law. So, for example, you may not sell your goods in Poland but since Amazon has a European warehouse in Poland, you will have to register for VAT in Poland too.

This is why I strongly recommend you reconsider using the Pan-European Amazon fulfilment program. It will trigger your VAT registration requirements in multiple countries because your goods will be moved across Europe.

Obviously, it’s best to register for VAT BEFORE you send any goods to that country and start selling, just to keep your books clean and Amazon happy.

The only country this law does not apply to is your home country, which is where your business is registered. You can keep stock there without needing to register for VAT until you reach the VAT registration threshold.

Ok, with basic VAT information, thresholds, distance-selling and the goods location rules covered, it’s time to take a look at some real-life scenarios to help you better understand the whole VAT issue and determine with certainty whether or not you need to register for VAT!

Do You Have to Register for VAT?

Let’s start with some of the most typical situations that will apply to people based in the UK:

Seller location: United Kingdom
Stock location: United Kingdom
Turnover: £50k in the last 12 months
Have to register for VAT? NO

Your turnover is below the UK VAT registration threshold, you store goods only in the UK, so you don’t have to register for VAT.

Seller location: United Kingdom
Stock location: United Kingdom
Turnover: £90k in the last 12 months
Have to register for VAT? YES

As you have reached £90k in sales for the last 12 months of trading, you do have to register for VAT in the UK.

Seller location: United Kingdom
Stock location: United Kingdom, Germany and Poland
Turnover: £50k in the last 12 months
Have to register for VAT? YES

As you’re storing goods in Germany and Poland, you have to register for VAT in Germany and Poland. You don’t have to register for VAT in the UK as your sales are just £50k in the last 12 months.

Seller location: United Kingdom
Stock location: United Kingdom, Germany and Poland
Turnover: £90k in the last 12 months
Have to register for VAT? YES

You have to register for VAT in all three countries; in Germany and Poland because you’re storing your goods there and the UK because you have reached the VAT registration sales threshold.

Seller location: United Kingdom
Stock location: United Kingdom
Turnover: £70k in the last 12 months, £50k to Greece in 2017
Have to register for VAT? YES

You have to register for VAT in Greece as you have sold £50k worth of goods to that country. This is above the Distance Selling EU VAT registration threshold for Greece, which stands at €35k.

However, you don’t have to register for VAT in the UK yet since you have not reached the UK’s VAT registration threshold of £85k per last 12 months.

Seller location: United Kingdom
Stock location: Italy
Turnover: £10k in last 12 months
Have to register for VAT? YES

You have to register for VAT in Italy from day one because you’re storing goods there in Amazon’s warehouse. You’re not obligated to register for VAT in the UK, though, as you have not reached the UK VAT threshold.

These are the most typical scenarios a UK-based seller will face. Now, let’s take a look at what happens when someone from outside the UK but who is living in the EU sells on Amazon.

Seller location: Slovakia
Stock location: Slovakia
Turnover: £20k in the last 12 months
Have to register for VAT? NO

Your stock is held with you in Slovakia and you haven’t reached the local VAT registration threshold, which currently stands at 49,790 EUR (so almost €50k).

Seller location: Slovakia
Stock location: Slovakia
Turnover: £50k in the last 12 months
Have to register for VAT? YES

You have to register for VAT in Slovakia as you have reached the local VAT registration threshold, which stands at 49,790 EUR.

Seller location: Slovakia
Stock location: Slovakia
Turnover: £250k in the last 12 months, £75k in 2017 to the United Kingdom
Have to register for VAT? YES

You have to register for VAT in Slovakia since you have reached local VAT threshold. PLUS, you have to register for VAT in the UK as you have reached the Distance Selling EU VAT registration threshold, which stands at £70k per calendar year.

Seller location: Slovakia
Stock location: United Kingdom
Turnover: £20k in the last 12 months
Have to register for VAT? YES

You have to register for VAT from day one when your stock arrives in the UK, no matter how much you sell.

Seller location: Slovakia
Stock location: United Kingdom
Turnover: £100k in the last 12 months, £50k of that to Portugal
Have to register for VAT? YES

You will have to register for VAT in all three countries: your home country, Slovakia (as you have reached local VAT registration threshold), United Kingdom (as your goods are stored there), and Portugal (as you have reached the Distance Selling EU VAT registration threshold to Portugal, which currently stands at 35,000 EUR).

Ok, lastly, what about people who are based outside the EU? Sellers from the US, China and other countries around the world?

The same rules of distance-selling thresholds and goods placement country apply to them! If you reach the distance sales threshold to specific countries, you have to register for VAT there. If you store goods in an EU country, you have to register for VAT there.

Here are some of the most typical examples applicable to Amazon sellers:

Seller location: United States
Stock location: United States
Turnover: £20k in the last 12 months on Amazon.co.uk
Have to register for VAT? NO

You are storing goods in your home country and you’re not reaching the distance selling EU VAT registration thresholds, so you don’t have to register for VAT.

Seller location: United States
Stock location: United Kingdom
Turnover: £20k in the last 12 months
Have to register for VAT? YES

As you’re storing goods in the UK, you have to register for VAT in the UK from day one.

Seller location: United States
Stock location: United States
Turnover: £80k in the last 12 months to UK customers
Have to register for VAT? YES

You have to register for VAT when you go above the £70k threshold for distance selling to the UK, even though you still store your goods in the US.

Seller location: United States
Stock location: United Kingdom
Turnover: £100k in the last 12 months, £40k of that in 2017 to Spain
Have to register for VAT? YES

You have to register for VAT in the UK (goods location) and in Spain too since distance sales to Spain exceed the €35k threshold.

I really, really hope these examples will help clear this issue up for once and for all. And I hope it makes it easier to figure out how this whole VAT thing works and whether you need to register for VAT or not.

These are the most typical situations I could come up with, but this is not a full and exclusive list! Please let me know in the comments block below the post if there is a scenario I haven’t covered so I can add it to the list.

Conclusion

So that was it! A detailed overview of VAT registration for Amazon sellers. I have tried to include as much information as possible without being too specific or providing contradicting guidance. I will repeat myself once again and remind you that I’m not a qualified accountant and I can’t help you with specific VAT calculation questions or anything like that. You need to consult with a professional accountant to get qualified advice.

As Amazon sellers, we all wish that these laws, rules and regulations were never invented. We don’t have large budgets for accountants, tax lawyers and all the other resources that large companies have. It can get frustrating; trust me, I know the feeling because I’m an Amazon seller myself and I’ve had to figure it all out myself.

A few years ago, it was all total nightmare to navigate because there was no clear guidance or any of the tools and services that are available today.

Amazon does understand the problem this creates for small sellers, hence all the VAT tools and services they have recently introduced on the platform. No other third-party marketplace (eBay, Etsy, etc.) has done anything like this, so we should be thankful that they are at least trying to make it easier for us.

We should also be thankful for all the extra sales opportunities Amazon’s expansion into other countries brings us! I can’t really complain about the VAT issues—which is nothing to do with Amazon itself—when we get the opportunity to sell in almost every major country in the world, store goods at Amazon’s warehouse, and make money without lifting a finger.

So please, as you dive into figuring out your VAT situation, always keep the positives in mind, like the opportunity for international trade and what it can do for your business. These are opportunities that, just a generation ago, were inconceivable for a small business or individual. There are people who always complain about something. I ignore such people. Don’t waste your time and energy on negativity—look for solutions and be thankful for the opportunity!

I’m sure I will come back to the whole VAT issue very soon because there are some things I want to cover separately, like the VAT registration process itself, Amazon VAT services, etc. If you have any suggestions for what VAT topics I should cover in future blog posts, please leave them in the comments section below.

37 Comments
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  1. Hi Andrew,

    First and foremost, I really wanted to thank you for this post. It’s great help!

    One more question about the example below: In this example, where should VAT be paid and claimed back? I guess you have to pay £11.5K (£50K x 0.23) – the VAT already paid when sourcing those goods for Portugal, but for the remaining £100K I’m unclear if those should be paid where your company is registered (Slovakia), or where the goods are stored (UK).

    Seller location: Slovakia
    Stock location: United Kingdom
    Turnover: £100k in the last 12 months, £50k of that to Portugal
    Have to register for VAT? YES

    You will have to register for VAT in all three countries: your home country, Slovakia (as you have reached local VAT registration threshold), United Kingdom (as your goods are stored there), and Portugal (as you have reached the Distance Selling EU VAT registration threshold to Portugal, which currently stands at 35,000 EUR).

    Thanks a lot!
    Luis

    1. Andrew Minalto

      Hi Luis,

      Thanks for your comment.

      You will have to consult with an accountant/tax advisor for detailed advice, just like I do it myself 🙂

      I don’t really know all the ins and outs as I let my accountant deal with all of that.

      Andrew

  2. Ebrahim Moshaya

    Hi Andrew,

    Thank you for this informative article. Please could you advise how you generate the report in Amazon Seller Central which shows the Sales Snapshot for the last 12 months?

    1. Andrew Minalto

      Hi Ebrahim,

      It’s very easy to do! 🙂

      Go to Reports > Business Reports

      In DATE section select CUSTOM and choose the period you want to see/cover.

      And that’s it!

      Andrew

  3. Hi Andrew

    Really great article I have to say, will check out further posts from you. Lots of people out there giving advice on FBA, but few that manage to get precise, straight forward guidance especially on more complex topics like taxes. I’m running a mid-sized business in retail currently (>10m rev), so I’m quite familiar with VAT and it’s accounting at that scale – and yes it is quite complex and can be confusing. I’m now thinking to set up a small FBA business with my brother (small for the start ;)), so am trying to get my head around the basic commercials. I have one specific question in regards to VAT after reading your article, maybe you know that one: Assuming that we don’t register for VAT initially and we import goods from China to the UK (to store at an AMZ UK warehouse), how do we need to account for import VAT? Depending on the goods, import duties will be due for sure I take since we’re importing goods for resale, but what about import VAT as a non VAT-registered business? Will we simply pay it and then just won’t be able to reclaim it (since we’re not paying output VAT/ not filing a return in the first place) or will we not have to pay import VAT at all (just duty)? Of course this would have significant impact on our cost of goods, so drive pricing decision.

    Best regards,
    Tilmann

    1. Andrew Minalto

      Hi Tilmann,

      Thanks for your comment.

      As a non-VAT registered business, you will simply pay VAT on imports and not claim it back, yes. It’s basically just an expense in a set-up like this, just like the import duty or shipping fees to the UK.

      Thanks,
      Andrew

      1. Hi Andrew

        Thanks for fast reply!

        Best
        Tilmann

  4. Hi Andrew, you mention:
    “For Amazon sellers, I do not specifically recommend this flat VAT rate scheme because some of the Amazon VAT services may not be available to you if you are using this option. ”
    Which Amazon VAT Services are not available for sellers on the flat VAT rate scheme please?

    1. Andrew Minalto

      Hi Ray,

      As far I know the VAT returns service is not available for flat rate scheme payers (but then again you may not need it anyways).

      And there was something else which I have forgotten right now.

      Andrew

  5. Thank you mate
    it was really informative
    I have just resisted on Amazon FBA UK , However Amazon haven’t asked me for any VAT number. Knowing that I am a non UK and residing out of the UK.
    I just started communicating with suppliers in china but I wonder should I proceed and bring shipments to the UK or should I clarify about my VAT status, having said that Amazon is putting a limit of 15000 Euro on my sales (so maybe this is the VAT threshold ?)
    generally, my question is that if I am not a vat registered my goods will be deliverd to to amazon warehouse or will be stocked in borders waiting for my vat registration ?

    1. Andrew Minalto

      Hi Baker,

      IF you plan on sending goods to Amazon FBA in the UK, you should register for VAT before you do that.

      Amazon did not ask you for VAT number at account registration stage because you CAN sell on Amazon UK without a VAT number IF you don’t use FBA in the UK. But as you will be using FBA in the UK, you will need that VAT from day one of trading.

      Andrew

  6. Hi Andrew,

    Thanks for the post on VAT. I really enjoyed reading your blog.

    I am an Amazon seller in the US and am interested in expanding to Amazon Europe. Most of our stocks are in the US but we also have a supplier in Denmark. If we have the Danish supplier drop ship their products from Denmark to customers in Europe, do we have to register for VAT in Denmark? Technically the inventory were not ours. The Danish company owns the inventory.

    If those inventory count as ours, but we avoid selling in Denmark, (for example cancel orders from Denmark) do we still have to register for Danish VAT?

    Thanks you.

    Lei

    1. Andrew Minalto

      Hi Lei,

      Thanks for your comment.

      I’m sorry but I don’t know the answer to this one – I have never done dropshipping and have no idea on how VAT works in your situation.

      Try asking for advice on business forums.

      Thanks,
      Andrew

      1. Thanks Andrew.

        Lei

  7. Hi Andrew. Thank you for your article. I think I am still a little bit confused. If let’s say the final price a customer pays for your product on Amazon is 20 gbp it means that you can only sell 85000/20=>> 4250 items without paying VAT? If you sell more than that you need to register for VAT and start adding 20% to each product you sell? Thank you again for your help!

    1. Andrew Minalto

      Hi Andrea,

      Thanks for your comment.

      Yes, that is correct. At £20 a unit, it would take 4250 sales PER YEAR to reach VAT threshold.

      And you can add VAT to your price OR include VAT in the current price OR do something in between – that’s entirely up to you.

      So for example – if you increase the price by VAT amount, the new price will be £24 (£20 x 1.2).

      If you incorporate VAT into your existing price, it stays same at £20 (obviously you make less profit this way).

      Thanks,
      Andrew

      Andrew

  8. Roger Pearce

    Hi Andrew,
    Do you know anything please about UK based selling in USA with goods from China being sold in USA. Thanks, Roger.

    1. Andrew Minalto

      Hi Roger,

      What do you want to know?

      Do you have any specific questions?

      Andrew

  9. Ogai Mafuse

    Hi Andrew,

    Hope you are doing well, i am a mother of two want to start amazon selling account in the USA i read every top of this site which are very very useful i really appreciate your effort, could you please tell us more about USA vat or tax rules and where can we apply?

    1. Andrew Minalto

      Hi Ogai,

      Thanks for your comment.

      I will have a post about this in 2 weeks time, so stay tuned for that! 🙂

      Andrew

  10. Hi Andrew,

    I’ve just discovered your website which is something of a goldmine it seems. Such great, concise info.

    I think I have a grip on the bigger stuff like all the thresholds and country-specific VAT, but do you have any pointers towards more basic business stuff?

    I’m a fairly successful ebay seller, usually buying and selling used goods just as a hobby at the moment. None of this currently triggers HMRC declaration rules from what I can see as profits are only in the hundreds of pounds.

    However I’m thinking about sticking my toes into the water more formally, but struggling to get my head around really basic stuff, and whether operating as a business would just in fact wipe out my margins when scaled.

    Current example scenario operating as a private individual:

    1. Buy a used tablet off ebay usually at auction = £200
    2. Relist as a BiN with better listing and info = £300
    3. Outcome after paypal/ebay fees = £59.60

    Plan to do this at greater scale using FBA (under VAT threshold):

    1. Buy a used tablet off ebay usually at auction = £200
    2. List as a refurb on Amazon = £300
    3. Estimated outcome after amazon/FBA fees = £85 (what am I missing that will eat into this margin, tax on profits is one I assume?)

    Future plan to do this at greater scale using FBA (over VAT threshold if takes off):

    1. Buy a used tablet off ebay usually at auction = £200 (do I claim back VAT on this?)
    2. List as a refurb on Amazon = £300 (do I still price at £300 or do I need to change to account for VAT?)
    3. Estimated outcome after amazon/FBA fees = £85 (how does this figure change?)

    I know you can’t give individual advice, but hopefully you can see what I mean and perhaps point me in the right direction 🙂

    1. Andrew Minalto

      Hi Sam,

      Thanks for your comment.

      I really don’t know how VAT will work for you with used items, bought from individuals etc. – this is something you will need to research as I have no experience with that set-up.

      One thing that I wanted to clarify though – in second scenario you say you get to keep £85 after FBA/Amazon fees. How did you calculate that?

      As referral fee alone on that sale will be £36 plus you have to pay FBA fee:

      https://services.amazon.co.uk/services/sell-online/pricing.html/ref=UK_SOA_FAQ_pricing_pricing

      So make sure you fully understand how Amazon fees work.

      Andrew

      1. Yes of course I won’t be jumping in blind 🙂

        That was a rough calc of the ref fee plus est £3 fba based on amazon’s example of a toaster. Am I missing something?

        I see what you’re saying about used goods, it seems there’s a margin calculation to go through from what I can see on hmrc.

        To go back to that scenario if you have time (no worries if not) and assume I was VAT registered and buying new:

        1. Buy a product = £200 (do I claim back VAT on this?)
        2. List on Amazon = £300 (do I still price at £300 or do I need to change to account for VAT?)
        3. Estimated outcome after amazon/FBA fees = £85 (how does this figure change?)

  11. Ho Andrew,
    Thank you for the detailed article. I am still not clear on something, though. What if I have my goods in UK warehouse and I am VAT reg in the UK, but also selling on Amazon DE and Amazon Spain, let’s say. Let’s say I am delivering all my stock in UK only. Will amazon distribute it themselves in Germany and Spain and made me register for VAT in these countries?

    You must register for VAT in each country where your goods are stored, except your local/home country!

    And there are no thresholds! It starts from day one, so even if you send just 10 items to another country and sell them from there, you need to register for VAT in that country. Even more, you don’t even have to sell to that specific country! The location of the goods alone triggers this VAT registration law

    Please advise.

    1. Andrew Minalto

      Hi Alex,

      Thanks for your comment.

      No, you won’t have to register for VAT in Germany and Spain IF your goods are held in the UK. You would only need to register for VAT in those countries WHEN your sales to those countries reach distance selling threshold.

      Amazon won’t “automatically” distribute your goods from the UK to other European countries, no. They will only do this IF/WHEN you ask them to do it by signing up to one of the European FBA plans (like Pan European FBA etc.) But by default, when you send stock to Amazon UK, it will only stay in the UK.

      Hope this helps!

      Thanks,
      Andrew

  12. Hi Andrew,

    I’ve bookmarked it, so I can come back and try some of the new tips thanks Andrew to keep inspiring us! Keep posting.

    1. Andrew Minalto

      You’re welcome! 🙂

  13. Anders Jørgensen

    Great article Andrew!

    I am on Ebay UK and US while my shop is selling to the UK.

    For my shop I use a UK supplier as that works great for me.

    I live in Denmark and by Danish laws I can’t register for vat as no stock is imported or exported/sold to Denmark!

    I do pay vat at my UK supplier for any orders I get.

    What does this mean UK vat vice Andrew? The 12 month or what

    1. Andrew Minalto

      Hi Anders,

      Thanks for your comment.

      I don’t know exactly how this works with dropshipping, as I have never done it myself.

      But theoretically, as your stock is in the UK, you probably need to register for VAT in the UK.

      But I’m not 100% sure on this one and you will have to seek professional’s advice on this.

      Thanks,
      Andrew

  14. Gurpreet Sidhu

    Hi Andrew

    Great article, very well written to explain such a confusing topic.

    I have wrote a few myself, being an Amazon seller and making some software to help the situation.

    One thing I can’t get my head around, is the “Intra-Community Supplies” report, which some EU countries want when filing. I get the simple B2B transactions aspect of it, but what about the Cross Border Stock movements between Amazon warehouses? Can you shine some light on that? Where can I find this info on Amazon Seller Central.

    Many Thanks

    Gurpreet

    1. Andrew Minalto

      Hi Gurpeet,

      Thanks for your comment.

      Unfortunately I haven’t used Pan European FBA yet so don’t know what reports on this aspect they provide.

      You should contact Amazon and ask them more information on this.

      Sorry, not much of a help, I know – but I can’t know everything 🙂

      Thanks,
      Andrew

      1. Gurpreet Sidhu

        For sure, it starts to get way more complicated…

        to stay fully compliant across the EU:

        Intrastat Reports (they have their own set of thresholds)
        Intra-Community Supplies Reporting
        EC Sales List
        Sequential Invoicing for some EU countries
        Country Specific reports (ex. SAF-T for Poland)

        Maybe you can look into these for future articles!?

        I have reached out to Amazon, who now direct you towards Avalara as the expert. Having moved on from KPMG.

        Bit of a chicken and egg situation, because you wait in line to get VAT numbers for the PAN-EU countries so you can unlock the Amazon VAT Services report. However Avalara are very slow, and don’t seem to want your business.

        1. Andrew Minalto

          Yeah, it is very complex situation indeed – NOT something you can do without a help of professional accountant.

          Luckily for me, I have someone who basically works on my books full time, for many years now and they take care of everything for me.

          Thanks,
          Andrew

  15. Hi Andrew,

    Thank You as always, so informative, so concise and helpful. Best Mentor as always!!

    Thanks again.

    1. Andrew Minalto

      You’re welcome Andy! 🙂

  16. marianna havlitusova

    Flat scheme working fab for us. We are small business paying about 8.5% in VAT on Flat scheme. We are not ready for 20% VAT yet. As we don’t sell too many products to business buyers and hardly order new stock, this options is giving us option of being on VAT (making bigger turnovers) without overspending on the actual VAT. This stage is surely a breathing space for small sellers like us, before we get to a bigger world of 20% VAT charge. I think you should have mentioned that flat rate scheme has benefits, like for example MUCH lower rate. Knowing this information, we would have been on this scheme years ago. We were too scared of 20% charge and extra accounting costs, so this decision was postponed for far too long. Sadly our old accountant did not bother explaining all this subject to us. Found new one over a year ago and we are happily expanding without too many drastic changes. 😎

    1. Andrew Minalto

      Hi Marianna,

      Thanks for your comment and sharing your experience with the flat rate VAT scheme.

      Yes, for small time sellers this can be beneficial. I did not go into too much detail about flat rate VAT as this article was about something else.

      Plus the flat rate VAT scheme is only applicable for companies with turnover of less than £150k per year, which for Amazon sellers is not that high of a number. But it can still be a good option for someone who goes over the £85k threshold but has no plans on building a bigger business than £150k a year.

      Thanks,
      Andrew

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